DevExplains: Green Climate Funds

MANILA — Last April, the world's largest international climate fund rejected a proposal for the first time. Board members of the United Nations Green Climate Fund were conflicted about a roughly $100 million project designed to help more than a million Ethiopians — more than half of them women — adapt to severe droughts that have stricken the African country. The project, which was put forward by the U.N. Development Programme in tandem with the government of Ethiopia, suggested implementing a wide range of activities geared toward enhancing local resilience — such as improved access to water and introducing climate smart technologies. But most of the GCF's developed country board members were not convinced that the project should be funded. Part of the reason, they argued, was that it was a development project and not necessarily a climate change one. The decision baffled stakeholders.

"We've had a lot of internal soul searching about that particular proposal," Pradeep Kurukulasuriya, head of climate change and adaptation programming at UNDP, told Devex.

The UNDP is far from alone. The question of where to draw the blurry line on what projects or aspects of projects are climate-related — and thus eligible for climate funding — and which are classed solely as “development” has periodically stumped even the most experienced climate finance experts.

Two years after the landmark Paris Agreement on climate change, developing countries and their climate finance partners are still figuring out how to thread that needle. With limited grant funding available, the winners will be those who can identify and secure critical resources for adaptation proposals that big climate funds deem worthy.

"It seems like the world of adaptation is cycling back to those issues right now, and people have been raising this question again and they've been citing the report again," Heather McGray, director of the Climate Justice Resilience Fund, told Devex referencing her 2007 report that detailed the relationship between adaptation and development. "It’s a live question that in some respects is surprising, but in other respects, it reflects the nature of this particular challenge. It is not easy to overcome."

Climate change funds separate climate from development largely because the international community has already set aside a certain amount of money for development. Though the amount is rarely delivered on, economically advanced countries still continue to affirm their commitment to the 0.7 percent target set by the U.N. General Assembly. And so, when developed countries came together in 2009 and first committed $100 billion each year by 2020 for climate change adaptation and mitigation initiatives, some argued that the money should be new. This is also what developing countries asked for, although the matter continues to be up for debate.

For some projects, separating the two is simple. Most mitigation initiatives — such as renewable energy — fall clearly under the climate heading. One can quantify precisely how much a solar or geothermal project results in reduced or avoided emissions that would have otherwise accumulated due to the use of dirty energy sources like coal and oil. But making the green funding argument for adaptation projects can be tricky when so much of it touches upon development.

It all boils down to context. In some situations where the development baseline of a country or a community is so low, making the distinction between climate and development hardly matters: Any measures that will improve their wealth will improve their adaptive capacity.

For developing countries with a higher development baseline, however, being able to distinguish between climate and development is a useful ability that can result in a higher likelihood of winning those green grants.

Some adaptation projects are relatively easier to untangle than others. These largely have to do with infrastructure because they're easier to compartmentalize. For instance, if you build a road, that part of the project is development. What additives you include to make it climate resilient — such as raising the road to protect it against floods or changing the location of the road to higher ground — constitute adaptation and hence qualify for climate funds.

Where the tension between adaptation and development comes into the sharpest focus is in projects that involve agriculture, water, and livelihoods. The strongest proposals demonstrate that what is being funded really takes its root in something that is directly attributable to climate change as opposed to something that is avoidable yet exacerbated by climate change, which, while important, climate funds can argue against.

For instance, maize, which is grown by smallholder farmers, relies heavily on regular rainfall rather than on irrigation to thrive. And since 2015, its production in Southern and Eastern Africa has drastically fallen as a result of record-setting droughts plaguing the region. Scientists at the Massachusetts Institute of Technology predict that climate change will further exacerbate the situation as global temperatures rise over the next century. Since there are climate related impacts and vulnerabilities, a strong adaptation proposal can be made, which might include switching to other crops such as millets that are able to withstand the harsher conditions that some African farmers now face. By comparison, improper land use in certain countries is also exacerbated by climate change, but because it was avoidable to begin with some funds could argue against providing additional climate money.

"What's interesting is that it's not just a single switch from maize to something else," said UNDP's Kurukulasuriya. "It's the likely means to switch again over time as conditions continue to change. This is part of the problem with climate change. It's not just that change is occurring, but that change is occurring at a faster rate than it has in mankind's lifetime. The need to have that flexibility to understand what's happening around you and to change with that at the right time, becomes an incredibly important part of the armoury that countries now have to develop."

Assessing whether or not an impact is climate related requires undertaking a significant amount of climate modeling work or analysis, which Kurukulasuriya said is one of the major challenges that developing countries struggle with. Other common challenges, he notes, include lack of historical data at the community level and lack of technical capacity for forecasting the impacts of climate change as well as the effects of adaptation in both the near- and long-term.

"So it becomes a question of ‘what can we do on top of what's already been done to ensure that these additional risks of climate change are managed better?’"

— Pradeep Kurukulasuriya, head of climate change and adaptation programming at UNDP

For organizations and developing countries still intent on formulating an adaptation proposal, the best way to pinpoint what adaptation finance should focus on is by first establishing a development baseline, then doing additionality reasoning in terms of management of risks associated with climate change hazards, advises Kurulasuriya. Establishing a baseline entails looking at what is being done today to address the non-climate change related drivers of the underlying problem and what is likely to happen without any additional interventions, given the reality unfolding in terms of climate change — that is, the likely range of effects or impacts. Then, in order to establish the “climate change additionality” rationale of a project, organizations have to identify those additional results that need to be achieved to minimize the effects of specific climate change induced impacts. This thought process is what allows one to formulate and justify the importance of select adaptation interventions that address the drivers that are directly attributable to climate change.

"So it becomes a question of ‘what can we do on top of what's already been done to ensure that these additional risks of climate change are managed better?’" said Kurukulasuriya. "When you do that, you realize there's a lot of co-benefits to other development gains that you're also interested in achieving, such as women's empowerment, and you try to maximize those as much as possible."

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Climate change funds

It's important to note that adaptation projects are highly contextualized and what is a strong adaptation project in one community, or for one climate change fund, isn't necessarily the same for another. There's a granularity for the various international climate funds that centers on incremental costs. For instance, the Least Developed Countries Fund, which is part of the Global Environment Facility at the World Bank, requires a country's business as usual development plan and will only fund the increment — what additional funds are needed to reduce any climate induced risks or hazards. Distinguishing between the two is a bit easier because the LDCF supports mainly planning processes, including the preparation and implementation of national adaptation programs of action, or NAPAs, and some of the activities that come out of it. Also, the fund provides rubrics and technical guidelines, which admittedly offer pretty light guidance, but nonetheless help somewhat demystify the process.

On the other hand, the Kyoto Protocol's Adaptation Fund doesn't do incremental costs. Instead, it offers full cost financing for a concrete, localized project that helps vulnerable communities in developing countries adapt and build resilience to the negative effects of climate change. They don't try to define adaptation, but instead focus on the justification. "Project proposals identify climate risks, and respond to them accordingly with targeted responses and that is why you see a diverse range of adaptation sectors," said Mikko Ollikainen, manager of the Adaptation Fund Board Secretariat, adding that sectors vary from food security to disaster risk reduction.

The fund's secretariat and board do at times toggle back and forth about whether a proposed activity is climate related or sufficiently represents adaptation. "In cases where the Board does not view the proposal to be addressing adaptation, the climate impact or risk identified in the proposal is not clearly addressed by the proposed activities," notes Ollikainen. Oftentimes the project is revised by the implementing entity and brought forward at a later time.

The Green Climate Fund

Currently, the most politicized and enigmatic fund is the Green Climate Fund. The GCF is relatively young when compared to other climate change funds, and hence has yet to really figure out its approach to adaptation. Since it became operational two years ago, the fund has agreed to fully support approved adaptation project proposals where there are discreet interventions that would not have occurred, but for climate change. For instance, it fully funded a UNDP proposal to support Pakistan in addressing glacial outbursts given that the ensuing floods meet the aforementioned criteria. But Ewen McDonald, co-chair of the GCF, told Devex that incremental costs are a lot more complex, and it is an issue that the fund's board will be turning to next year. "We actually requested work from the secretariat on the development and application of an incremental cost calculation methodology and/or alternative methodologies as appropriate," said McDonald. "Incremental costs are certainly on the agenda of the board."

Developing countries on the front lines of climate change eagerly anticipated the creation of the GCF and its mandate to allocate half of all grant funding from its roughly $8 billion budget for adaptation. While the Fund's board members have yet to reach a consensus on what the GCF should define as adaptation, the Fund has identified four "results areas" related to adaptation that it thinks will deliver "major" climate benefits. These range from enhancing livelihoods for the most vulnerable people to increasing health and well-being.

The need for increased support for adaptation is undeniable, but the type of projects that the GCF chooses to support have been subject to heavy criticism and scrutiny by several civil society organizations and developing countries. "Even when projects are approved, they tend to be very large scale infrastructure projects and very little of the funds actually go down to the grassroots, the most vulnerable communities and that's a very big disconnect," said Saleemul Huq, director of the International Centre for Climate Change & Development. "They should be the priority."

Community-based adaptation projects should also have the potential to be scaled up, as part of the fund's goal to promote a "paradigm shift." But it is not easy to pinpoint what are the best activities to propose, especially when there's so much that humanity still doesn't know about how climate change is going to unfold in the future. Even if an organization or a government can identify what the ideal activities needed for a community to adapt to the harsh realities of climate change are, it is unrealistic for them to come forward with a proposal asking for hundreds of millions of dollars with every single thing planned out and justified. So CJRF’s McGray recommends that large international climate funds such as the GCF make sure that each of their projects create some sort of "adaptation hypothesis." "It will probably take a checklist or a set criteria to make sure that the project has done justice to understanding its climate risk context, and has proposed adaptation activities that 'hypothesize' a logical solution to those risks. Good projects will also have ways to track whether their 'adaptation hypothesis' is working out, and how to adjust if it's not."

The other part of the challenge with scaling-up is that the best way to enhance a community's resilience to the effects of climate change often is to integrate adaptation into other decision-making processes. When you do that, it may not be very expensive, so it doesn’t lend itself to pitching a big project. "Figuring out how to pitch the mainstreaming process in a way that’s really compelling and gets funded would be really important and powerful to do," she said. "We need funds to evolve beyond a strictly projectized mentality."

GCF's McDonald acknowledges the challenge facing the climate change adaptation community. He said that one way the GCF is trying to reach the necessary level of ambition when it comes to adaptation is by supporting projects that can be scaled up by being replicated. He points to the almost $40 million project in the Pacific island of Tuvalu that the GCF approved back in 2016 and is already being replicated in other small island developing states. The project focuses on building coastal resilience through activities like creating sea walls, which are critical defenses for many low-lying countries vulnerable to rising sea levels.

"I'd encourage countries to not only think about their own specific country, but to think about the opportunities around a similar region, similar countries, or similar thematic groups," said McDonald, pointing out that the Caribbean, for instance, is facing similar threats to Pacific small island developing states. "You can scale a project or scale the ambition or get together and be creative and come up with ideas that might work. To maximize the benefit of the GCF, to maximize the opportunity to respond to climate change, we have to think in a creative, different way about how we can put these projects together."

* Update, Jan. 10, 2018: This article has been updated to clarify that there is a debate over whether the pledged climate change money must be new.

About the author

Fatima Arkin is a freelance journalist specializing in climate change, human rights and sustainable development. She has reported across Asia, Africa, Europe and North America for Foreign Policy, SciDev.net, Maclean's and many others. She holds a B.A. in international development and history from McGill University and a graduate diploma in journalism from Concordia University, both located in Montreal, Canada.

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